Sensex plunges 280 points; interest sensitive stocks hit

Mumbai, June 2 (IANS) A less-than-expected easing of the monetary policy by the Reserve Bank Of India and the hawkish outlook given by it, subdued investor sentiments and led a barometer index of the Indian equities markets to trade deep in the red during the post-noon session on Tuesday.

The benchmark index of the Indian equities markets, the 30-scrip Sensitive Index (Sensex), was trading a little over 280 points or 1.01 percent down.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) was also trading in the negative zone. It was lower by 80 points or 0.94 percent at 8,353.75 points.

The Sensex of the S&P Bombay Stock Exchange (BSE), which opened at 27,890.73 points, was trading at 27,567.31 points (at 12.15 p.m.), down 281.68 points or 1.01 percent from the previous day’s close at 27,848.99 points.

The Sensex has touched a high of 27,902.53 points and a low of 27,404.16 points in the intra-day trade so far.

As soon as the Reserve Bank of India (RBI) statement was updated at 11 a.m., the BSE Sensex took a dip of over 200 points. At that point, the intra-day fall was as much as 450 points. Nearly an hour thereafter, the index was ruling with a loss of around 500 points.

During Tuesday’s trade, all the sector-based indices of the BSE, except the oil and gas index, were down. Heavy selling was observed in interest sensitive stocks like banking, automobile, capital goods, fast moving consumer goods (FMCG) and metals stocks.

Around 11 a.m., the RBI lowered its short-term lending rate by 25 basis points in a move that could potentially reduce the cost of borrowings on personal and corporate loans.

In his bi-monthly monetary policy review for the current fiscal year at the RBI headquarters here on Mint Street, Governor Raghuram Rajan said the repurchase rate has been lowered to 7.25 percent on the basis of an assessment of the current and evolving macroeconomic situation.

Prior to the review, the repo rate — the interest rate which the central bank levies while lending short-term funds to commercial banks — stood at 7.5 percent.

However, market analysts said that the 25 basis points cut was factored-in by the market and that it was hoping for a 50 basis points cut. Even a cash reserve ratio (CRR) cut was also expected.

“The expectations and the factored-in possibility was of a 25 basis points cut. But the markets would have really rallied if there was a 50 basis points cut,” Devendra Nevgi, chief executive of ZyFin Advisors, told IANS.

“A 50 basis points cut would have stabilised the markets and given it an upward push after the initial downtrend that took place due to the Greece crises,” Nevgi said.

According to Nevgi, the hawkish statement by the RBI governor on low yielding monsoon, international volatility and an uptake in crude oil prices has also subdued the markets.